Michael Heinrich’s ‘New Reading’ of Marx—A Critique, Pt 4

Heinrich on crises—some background

A century ago, a discussion occurred in the Second International about the “disproportionate production” theory of crisis. This theory holds that crises arise because of disproportions between the various branches of industry, especially between what Marx called Department I, which produces the means of production, and Department II, which produces the means of personal consumption.

This led to speculation on the part of some Social Democrats that the growing cartelization of industry would be able to limit and eventually eliminate the crisis-breeding disproportions. This could, these Social Democrats speculated, give birth to a crisis-free capitalism, at least in theory. The revisionist wing of the International, led by such figures as Eduard Bernstein—the original revisionist—put its hopes in just such a development.

Assuming a rising organic composition of capital, Department I will grow faster than Department II. The Ukrainian economist and moderate socialist Mikhail Tugan-Baranovsky (1865-1919), who was influenced by Marxism, claimed there was no limit to the ability of capitalism to develop the productive forces as long as the proper relationship between Department I and Department II is maintained. The more capitalist industry grew and the organic composition of capital rose the more the industrial capitalists would be selling to their fellow industrial capitalists and relatively less “wage-goods” to the workers.

Tugan-Baranovsky held that capitalism would therefore never break down economically. Socialism, if it came at all, would have to come because it is a morally superior system, not because it is an economic necessity. This put Tugan-Baranovsky sharply at odds with the “world-view Marxists” of the time, who stressed that socialism would replace capitalism because socialism becomes an economic necessity once a certain level of economic development is reached.

Sweezy and Tugan-Baranovsky

In his “Theory of Capitalist Development,” Paul Sweezy was horrified by Tugan-Baranovsky’s arguments. Sweezy was aware that a growth of Department I relative to Department II implied that the process of capitalist expanded reproduction would gain ever greater momentum over time. This was especially true because Sweezy, like Heinrich, did not believe that there was any particular downward tendency in the rate of profit. If the tendency of the rate of profit is downward, this implies a limit of capitalist accumulation in terms of value, since new capital is overwhelmingly formed out of accumulated profits.

Sweezy, who was a child of the Depression, had good reason to assume that the kind of crisis-free, ever-accelerating economic growth foreseen by Tugan-Baranovsky was simply impossible under capitalism. The industrial capitalists, Sweezy assumed, would not be able to find markets for the tremendous rise in the quantity of commodities that would be required by Tugan-Baranovsky’s model. Didn’t the Depression provide proof enough? But Sweezy found that he could not prove mathematically that Tugan-Baranovsky was wrong. As a result, Sweezy found himself unsatisfied with the chapters on crisis theory contained in the “Theory of Capitalist Development.”

Sweezy’s big mistake: trying to explain crises without explaining money

The big mistake Sweezy made in the “Theory of Capitalist Development” was his attempt to explain crises without examining Marx’s theory of money. In fact, a strong case can be made that Sweezy in this work should simply have stated that crisis theory lay beyond the scope of the work. This is especially true because the “Theory of Capitalist Development” was aimed at explaining the basic ideas of Marx’s economic theory to English-speaking economics students who, like Sweezy, had been educated in marginalist theories.

Sweezy should either have tackled Marx’s theory of money, which would have put him in a position to develop crisis theory if he chose to, or, alternatively, he should have avoided crisis theory altogether. Considering the nature of that work, the latter would probably have been the best course. If he had followed either of these two alternatives, the “Theory of Capitalist Development” would have been, in my opinion, a better book.

Sweezy also failed to tackle monetary theory in “Monopoly Capital.” Indeed, this work, unlike “The Theory of Capitalist Development,” largely ignores value theory altogether. In “Monopoly Capital,” Baran and Sweezy actually say very little about crisis theory. They were more interested in explaining “stagnation”—the persistence of unemployment and excess capacity across the industrial cycle—than they were in examining the industrial cycle and crises.

Heinrich and crisis theory

In contrast, Michael Heinrich in his “Introduction to the Three Volumes of Karl Marx’s Capital,” unlike Sweezy in either of his two books, does analyze money. He even calls Marx’s value theory a “monetary theory of value.” The problem is, as we saw last month, that Heinrich analyzed money incorrectly, beginning with his failure to understand Marx’s admittedly difficult—especially for the philosophically uneducated—concept of “abstract labor.” Therefore, while Sweezy’s failure to analyze money in developing his theory of crisis left the door open to a correct theory of crisis once an analysis of money is added to it, Heinrich’s false theory of money closes the door to a correct theory of crisis.

In my opinion, Heinrich should not even have tackled crisis theory in his “Introduction.” He should have limited himself to saying that while Marx provides many clues to crisis theory in “Capital,” crisis theory as such lies beyond the subject matter of that work and consequently of any introduction to it.

However, since Heinrich did choose to tackle crisis theory in his “Introduction,” as in his polemic against the tendency for the rate of profit to fall that Monthly Review chose to publish in its April 2013 issue, some comments on what Heinrich did have to say on crises is appropriate here.

Heinrich, despite his grave mistakes in Marxist value and monetary theory, does make some correct points about crises. First, he realizes that crises involve the overproduction of commodities. Unlike most Marxists these days, who often talk about the “over-accumulation of capital”—presumably referring to crises of overproduction—Heinrich is not afraid to use the term “overproduction” when describing the nature of capitalist cyclical crises.

Heinrich also realizes, despite his false theory of money, that the existence of money does make crises possible. He explains quite correctly that neoclassical theory implicitly assumes an economy without money. If we assume that money does not exist, then it is indeed impossible to explain how there can be a “general glut” of commodities. Heinrich explains that neoclassical economists who either explicitly or implicitly deny even the possibility of the generalized overproduction of commodities—that is, Says Law—are obliged to blame real-world crises on incorrect government policies or factors that are external to capitalism. All this is very good.

Heinrich also correctly stresses, unlike the Social Democratic “disproportionality theorists” of the era of the Second International, that crises are indeed inevitable under capitalism. Since his “Introduction” is, after all, an introduction to the three volumes of “Capital,” a work that itself does not deal with crises in a systematic way, one would hardly expect Heinrich to develop a full theory of crises in his short book. Indeed, if anything, a strong case can be made that he should have avoided the subject altogether or simply limited himself to a statement that a fully developed theory of crises lies beyond the three volumes of “Capital.”

Heinrich, crises, and the fate of capitalism

“In crises,” Heinrich writes, “the unity between spheres (such as production and consumption) that belong together but become independent of one another (production and consumption follow different determinations) is violently restored.” (p. 174) Therefore, since crises solve in their own way the contradictions of capitalism, don’t crises actually strengthen capitalism in the long run? This indeed is Heinrich’s position. Crises, he explains, occur under capitalism, and they are not mere accidents but are inevitable. But, according to Heinrich, crises have no revolutionary implications. Instead, they periodically strengthen capitalism by freeing it of the contradictions between production and consumption that build up between crises.

What Heinrich ignores here is the role that crises play in the centralization of capital. Because the ability of all existing independent industrial capitals to develop production at any given time exceeds the ability of the market to expand, each successive economic upswing must end in a crisis of generalized overproduction. (1) When after a period of prosperity and overproduction a crisis inevitably breaks out, a number of the independent capitals must be eliminated. True, with the inevitable next upswing new capitals can again appear as the market expands for awhile more rapidly than production does. This is especially true in new branches of industry. Today or at least until the very recent past, smart phones and tablet computers were examples of this.

In the very near future, this will likely be the case with fully electric cars and perhaps three-dimensional printers as well. For the moment, the markets for these commodities is not very big, but these markets will likely in the not too distant future expand dramatically. If these markets (2) turn out to be duds, no doubt other new types of commodities will appear where the market for them will for awhile grow much faster than the ability of the industrial capitalists to produce them.

In the recent past, personal computers, both desktop and laptops, were examples where capitalist industry struggled to keep up with demand. But this is no longer the case. In this branch of industry, the phase of “consolidation”—the centralization-of-capital phase—has now arrived, and some very large industrial capitals such as the Hewlett-Packard Company, the world’s largest producer of personal computers, is now fighting for survival.

Indeed, when the period of the market growing faster than production in a new branch of industry ends—as it has now done in the personal computer market—the business press speaks of the industry “going through a period of consolidation”—that is, the centralization of capital increases after a period of decentralization.

Therefore, there are tendencies for both the decentralization and the centralization of capital. Marx pointed out somewhere that capitalism would quickly collapse if the tendencies toward the decentralization of capital did not exist. To understand capitalism, we must examine the tendencies toward the decentralization of capital as closely as the tendencies toward the centralization of capital.

However, as crises show, the ability of capital to increase production overall is much stronger than its ability to expand the capitalist market. As a result, the forces that work toward the centralization of capital are over time much stronger than the tendencies toward decentralization. In “Socialism Utopian and Scientific,” Engels viewed the successive crises as a spiral that is gradually closing, pointing toward the inevitable transformation of capitalism into a system of planned production by the associated producers—what we call socialism.

Capitalism comes into the world as a highly decentralized system of production where the producers relate to each other only through exchange. The system works best when it is highly decentralized. The presence of highly centralized production and monopolies undermines it. This is why the economists like to assume “free competition” and either deny altogether or at least play down the tendency toward the centralization of capital and monopoly. A good example is Keynes’ “General Theory,” which completely ignored this tendency.

Incredibly, as we will see, Heinrich denies the tendency toward the centralization of capital. This puts him at odds not only with “world-view Marxism,” but with Marx himself, and above all the Monthly Review school of Paul Sweezy, Paul Baran, Michael Kalecki, Samir Amin, Harry Magdoff, and John Bellamy Foster, who all put monopoly at the very center of their analysis of contemporary capitalism. This brings us to Heinrich’s theory of imperialism, or rather Heinrich’s denial of imperialism.

Heinrich versus Lenin on imperialism

Heinrich explains that while there were various theories of imperialism, it is the theory of Lenin that has proved most influential. I agree. What is Heinrich’s attitude toward Lenin’s theory of imperialism?

“His [Lenin’s—SW] analysis,” Heinrich writes, “was largely borrowed from the left-liberal author Hobson [1902] and presented in a Marxist guise.” Therefore, according to Heinrich, Lenin’s theory of imperialism is not a Marxist theory at all but really a left-liberal one. Though he was indeed influenced by Hobson, who was a bourgeois underconsumptionist crisis theorist who also influenced Keynes, Lenin was also influenced by the German Marxist Rudolf Hilferding, particularly his book “Finance Capital.” (3) This work, despite Hilferding’s mistakes on the theory of money, was the first book-length attempt from a Marxist perspective to deal with the developing phenomenon of monopoly capitalism. Lenin did not hide his admiration for “Finance Capital” in his own pamphlet, “Imperialism,” first published in 1916.

The fact that Lenin went on to lead the Bolshevik revolution, of course, has something to do with the influence of “Imperialism.” But even if the Russian Revolution had not occurred, I think “Imperialism” would still have been an extremely important work in the history of the development of the Marxist theory of modern imperialism. To ignore the influence that Hilferding had on Lenin’s theory of imperialism represents a considerable falsification of Lenin’s work and the development of 20th-century Marxism—call it “world-view Marxism” if you want to.

Heinrich then summarizes Lenin’s theory of imperialism as follows. Lenin, as Heinrich correctly points out, argued that an increasing number of branches of industry are dominated by a handful of corporations that are closely linked to a few giant banks, giving rise to what Lenin called “finance capital.” As a result, monopolies are often in a position to slow technical progress.

In addition, the export of capital as opposed to the export of commodities grows tremendously. By the turn of the 20th century, a handful of imperialist powers had completed the division of the the entire world among themselves. From then on, re-divisions of the globe were possible. This led to World War I, and, after Lenin’s death in 1924, to World War II, as the imperialist powers fought one another to re-divide the world.

Under imperialism, an upper layer of the working class, or “labor aristocracy,” shares in super-profits of the monopolies, providing a material basis for opportunism. Heinrich, paraphrasing Lenin, puts the term “corrupted” in inverted quotes. Heinrich thus indicates that he disagrees with Lenin on this point. This criticism has been made by other Marxists as well, especially Marxists who live in the imperialist countries. (p. 214)

Heinrich’s falsification of Lenin

Heinrich then passes from (inaccurately) paraphrasing Lenin to completely falsifying him. According to Heinrich, Lenin concluded that “a change in the capitalist mode of socialization” meant that it was “no longer value, but rather the will of the monopolists that was supposedly dominating the economy.” Heinrich concludes, “What Lenin intended as Marxist analysis has ultimately almost nothing [emphasis added—SW] to do with Marx’s critique of political economy.” (p. 215) On the contrary, Lenin argued that while the growing socialization of production under monopoly capital undermines the law of value, the law of value still reigns.

Marxist criticism of Lenin’s ‘Imperialism’

Lenin’s pamphlet “Imperialism” has been criticized by various Marxists ever since it was written almost a century ago. A common criticism of Lenin—and Hilferding—is that he overestimated the role of banking capital. That is why a tendency developed to drop the term “finance capital” in Marxist writings on imperialism after World War II. Since the crisis of 2008, however, this criticism of Lenin has faded. John Bellamy Foster has revived the use of the term “finance capital” in part by coining the new term “monopoly-finance capital.”

Sweezy’s criticism of Lenin’s ‘Imperialism’ in his letters to Baran

In his letters to Paul Baran that Monthly Review published posthumously in its July-August 2012 issue, Sweezy indicated that he was confused when he first read Lenin because he assumed that Lenin was saying that pre-monopoly capitalism was not characterized by the exploitation of poor capitalist countries by rich capitalist countries. As Sweezy deepened his study of capitalism, he found that this was far from the case.

These kinds of criticism of Lenin, whether or not they are correct, have nothing in common with Heinrich’s “criticism” of Lenin, which essentially claims that Lenin’s “Imperialism” is virtually worthless and then falsifies what Lenin actually wrote.

Leaving Heinrich’s falsification of Lenin aside, his criticism of Lenin amounts to the denial that there is any tendency for the centralization of capital. Heinrich writes: “First of all is the alleged [emphasis added—SW] transition from competitive to monopoly capitalism. Trends, by the way, that are not at all universally dominant and that sometimes even reverse.” What Heinrich overlooks is that the tendencies toward centralization dominate the tendencies toward decentralization. As for an empirical refutation of Heinrich’s claims, I strongly recommend “Monopoly and Competition in Twenty-First Century Capitalism,” by John Bellamy Foster, Robert W. McChesney and R. Jamil Jonna,” which appeared in the April 2011 issue of Monthly Review.

The export of capital and imperialism

Heinrich distorts Lenin when making a point also made by Ernest Mandel among other post-World War II Marxists (4) that “the export of capital supposedly necessitated by imperialist policies [emphasis added—SW] did in fact occur, but the greater portion of this capital export went not to colonies and dependent territories but to other developed capitalist countries that also pursued imperialist policies.” (p. 215)

First, Lenin stressed that imperialism is not a policy at all but monopoly capitalism itself. Leaving that not unimportant point aside, no matter how much of the total capital exported goes to other imperialist countries, the capital that is exported to oppressed countries—colonies, semi-colonies and neo-colonies, where the value of labor power is far lower and the rate of surplus value consequently far higher—extracts super-profits that can be shared through various mechanisms with the upper layers of the working class. Therefore, the export of capital to oppressed countries has an economic, social and political significance that the export of capital among the imperialist countries does not have.

Finally, Heinrich tries to dismiss Lenin’s analysis of imperialism by pointing out that the United States has become the world biggest capital importer. If an imperialism based on the export of capital actually exists, Heinrich implies, why is the world’s most powerful imperialist power a net importer of capital?

What Heinrich overlooks is that most of the “capital” the U.S. imports is actually recycled dollars generated by the U.S. trade deficit that finances the government’s budget deficit and goes mostly for the U.S. government’s non-productive consumption—such as for war. This capital largely takes the form of U.S. government securities that are held by the central banks of China, Japan and a few other countries. Actually, it is what Marx called fictitious capital. It represents not capital at all but merely claims on tax revenue that are capitalized at the prevailing rate of interest. If the fictitious capital represented by government bonds is excluded, the U.S. remains very much a capital exporter.

Also overlooked by Heinrich is the fact that every time the U.S. allows the dollar price of gold to rise—allows inflation to occur—it in effect repudiates part of its debt. When this happens, the U.S. ends up exploiting the nations that it “imports” capital from. This is quite the opposite of what Lenin meant by export of capital!

“Finally,” Heinrich writes, “the characterization of imperialism as ‘parasitic’ is problematic (5) not only due to the moralistic undertone, but also it is not readily apparent why the exploitation of a foreign working class should be worse than the exploitation of a domestic working class.” (p. 215) After monopoly, and closely linked to monopoly, the main feature of imperialism, according to Lenin, is parasitism. One example is today’s stock market culture. Another is the decay of industrial production in the imperialist countries—though this decay is less advanced in Germany than in Britain and the U.S. So perhaps Heinrich hasn’t noticed it.

Heinrich on the national question

As for why “the exploitation of a foreign working class should be worse than the exploitation of a domestic working class,” we need only remind Heinrich, a German, of the lessons of the not-so-distant history of his own country—the Third Reich—not to mention pre-Nazi Germany’s genocidal crimes against the peoples of Africa. Frankly, considering Germany’s history, a German Marxist expressing such views is extremely disturbing.

What Heinrich is overlooking is that capitalism develops the contradiction not only between exploiting and exploited classes but between exploiting and exploited nations. This is a point that, to their credit, the Monthly Review school has always emphasized. We who live in the imperialist countries, whether in the United States, Germany, Japan, France, Australia and so forth, must be particularly on guard against the indifference to the national question that Heinrich exhibits here.

The reasons that Marxists since the days of Marx and Engels have supported the right of all nations to self-determination is that until national oppression is ended, there is no way that the workers of the exploited nations will understand that it is the capitalist class rather than simply its various agencies—the Nazis in the days of the Third Reich, the British, French, Yankees, Zionists and so on—that is their ultimate enemy. That is why the struggle against national oppression is such a crucial part of the “battle for democracy.” If we leave out the struggle against national oppression and all racism, the whole struggle against capitalist exploitation is reduced to so many empty words.

Is capital a barrier to production?

“In the history of the workers’ movement,” Heinrich writes, “the notion that economic crises would ultimately lead to the collapse of capitalism, that capitalism was marching towards its ‘final crisis’ was widespread.” (p. 175) This sentence actually contains two quite different ideas. One is the correct idea that crises point toward the collapse of capitalism, or as I prefer to put it, to the transformation to a higher mode of production, because crises accelerate the centralization of capital. Successive crises move capitalism further way from “healthy” free competition toward a highly centralized socialized system of production that is ripe for being taken over by the associated producers. After each successive crisis, capitalism becomes ever more the “Empire of the mega-corporations,” as free software movement leader Richard Stallman—who is himself not a Marxist—calls it.

The other idea is the wrong idea that one fine day there will be a crisis of overproduction so severe that it will lead more or less automatically to capitalism being replaced by socialism. Perhaps, as Rosa Luxemburg put it, business will be so bad that the capitalists will give up and willingly hand over the keys to the factories to the workers. If we have learned anything from the “super-crisis” of 1929-33, it is that there will be no such friendly “automatic transition to socialism,” even if the future brings, as it likely will, one or more crises that dwarf 1929-33 in severity and duration.

“The true barrier of capitalist production,” Heinrich quotes Marx, “is capital itself.” (p. 176) “A barrier,” Heinrich explains, “should be understood here as a restriction: capital develops the forces of production, but this development merely serves the small-minded aim of the valorization of capital.” If this means anything, it means that capital does not in fact limit the development of production but rather simply serves the small-minded aim of “valorization of capital”—in plain language, making the rich richer.

In reality, capital acts as a major barrier to production and is far more than simply the subordination of production to the “valorization of capital,” though it is, of course, that as well. The most obvious restriction of production occurs during periods of crisis such as we saw most recently in 2007-09. But even between crises, capital restricts production. The crisis proper is always followed by a more or less prolonged period of depression/stagnation where many factories and machines lie idle and the level of production is far below the physical capacity to produce. Moreover, during both the crisis and the post-crisis stagnation phase, a good deal of society’s productive forces are destroyed.

Even during the phase of average prosperity that follows the crisis/stagnation phase, there is considerable amounts of excess capacity and unemployed workers—what the Monthly Review school calls “stagnation.” Though the restriction on production is less dramatic than in the crisis or post-crisis stagnation phase, the forces of production are being developed at a rate far below what would be possible with a full application of the primary productive forces of labor and science.

During the boom phase that succeeds the phase of average prosperity, the forces of production develop far more rapidly and draw as close as they can, as long as capitalism exists, to what would be possible if the forces of production were being developed in the interest of the associated producers. But the boom phase under capitalism is the precursor of the next crisis.

There is another way that capitalism acts as a barrier to the development of the productive forces that Heinrich himself acknowledges. The higher the rate of surplus value—or the lower the wage in value terms—the more capital will rely on living labor and the less it will rely on developing the forces of science and technology—machinery. Therefore, the low wages in value terms that the capitalists are always striving toward act as a major brake on the “intensive” development of production.

Capital’s alternatives to crises

Crises are so threatening to the capitalist social order as well as to individual capitalists that the capitalists are forced to develop alternative methods of restricting development in order to keep even worse crises at bay for as long as possible. One such method is the restriction of production. We see with cartels and trusts that production—and sometimes the application of new technology as well—is restricted in order to produce monopoly super-profits for a group of capitalists. Opposition to trusts and cartels over many decades has obliged capitalist governments to pass “anti-trust” laws that supposedly outlaw such combinations in most circumstances. Therefore, today cartelization is often carried out in the guise of enforcing so-called “intellectual property” rights.

An example of this kind of modern cartel is the British ARM corporation. ARM chips are extremely energy efficient and are becoming very powerful, threatening the Intel Corporation’s x86 chip monopoly. Today, ARM chips, which most often run various versions of the UNIX or UNIX-like operating systems (6) are used in smaller computers—smart phones and tablets. These small computers are taking on many functions previously performed by PCs, and not so many years ago—large in terms of physical size but not processing power—mainframe computers.

ARM itself produces no chips. Instead, it owns the patents for the chips. The industrial capitalist corporations that actually produce ARM chips can do so only with the permission of ARM. Unlike the case with a private cartel, if a company sells ARM chips, or chips that ARM claims “steals” its “intellectual property,” ARM can go to court—remember, the courts are an arm of the capitalists state—and demand that the state forcibly prevent the company from selling the chips. If the courts decide in ARM’s favor, their decision is enforced not simply within a nation but internationally through the World Trade Organization. And behind the WTO lies the muscle of the military machine of the U.S. and its NATO satellites.

The ARM chip cartel is only one example. There are many others. The life span of patents is regularly being extended. As a result, the development of the productive forces is increasingly hobbled because an “innovative company” that wants to introduce some new technology has to be concerned that it will be sued in court for “stealing” some other company’s—perhaps a company that simply owns patents and carries out no production of its own—”intellectual property.”

But the system of “intellectual property” is not the only method that contemporary imperialism uses to hold back the development of the productive forces. Experience shows that when previously underdeveloped countries enter into a period of rapid growth of capitalist production they are transformed into engines of crisis-breeding overproduction. Therefore, imperialism—defined as the most powerful monopoly corporations and their associated banks—aims to prevent the emergence of new independent countries engaged in capitalist production.

The most obvious example in the world today is the current crisis in the Arab world, which at the moment is centered on the U.S. drive to overthrow the Baath Party government of Syria. Reader Alex recently raised questions about my view of the Arab revolution, so this part of my critique of Heinrich’s work can be considered a reply to the questions Alex has raised.

I agree with Alex on one thing. The achievement of a united Arab republic in fact and not simply in name will not be easy. But neither was the creation of the Peoples Republic of China. Between the Taiping Rebellion in the 1850s, which can be considered the start of China’s modern revolution, and China “standing up,” in the words of Chinese leader Mao-Zedong, in 1949, almost a century of struggles—with many defeats along the way—intervened. The October Revolution in Russia in 1917 made the Chinese Revolution far easier—though far from easy—while the victory of the Gorbachev-Yeltsin counterrevolution has made the already difficult struggle for a united Arab republic even harder than it was before.

Many on the Internet have pointed out, correctly in my opinion, that the Arab world is now attempting to carry out a bourgeois-democratic (7) revolution, much like the U.S. carried out through both the War of Independence in 1775-1783 and the Civil War of 1861-1865 against British-backed rebel slaveholders. The Arab revolution is not yet a socialist revolution, and the prospects for an early transition from the bourgeois-democratic to the socialist revolution has been considerably set back by the counterrevolutionary destruction of the Soviet Union.

For historical perspective, the U.S. bourgeois-democratic revolution that unfolded between 1775 and 1865 took 90 years and cost the lives of more than 600,000 soldiers during the Civil War phase of the revolution alone, on top of those who died in the original war for independence. And who knows how many Black people died in their struggles against slavery that formed a crucial part of the U.S. bourgeois-democratic revolution between 1775 and 1865? Therefore, there is nothing surprising about Egypt’s failure to achieve a stable bourgeois-democratic republic in the wake of the fall of the Mubarak dictatorship in 2011.

Among the results of the victory of 90-year-long U.S. bourgeois-democratic revolution was the powerful growth of U.S. capitalism, which played no small role in the successive crises of overproduction that culminated in the super-crisis of 1929-33 and, finally, the transformation of European imperialism into a satellite of U.S. imperialism.

A successful Arab bourgeois-democratic revolution would have to accomplish what the U.S accomplished between 1775 and 1865—the era of bourgeois-democratic revolution that created the United States. First, the Arab world from Algeria to Iraq would need to be united under a common government with a common currency and a common tariff policy—much like the U.S. was united and a common currency established through the revolutionary war of independence and the Civil War. The Zionist entity of Israel, which is essentially a Western “white colony” (8), needs to be abolished.

This does not exclude by any means the possibility of the Israeli Jews learning to live side-by-side with their Arab brothers and sisters, as unlikely as this may seem today as world reaction continues to reign. But this will depend largely on the willingness of the Israeli Jews, or at least a considerable fraction of them, to make a clean break with their present Zionist misleaders and their alliance with the U.S. world empire and imperialism in general—from the beginning the basis of the Zionist movement. No nation including the Arab nation can tolerate a hostile outpost in its midst. We in the West have no right to make demands on the dispersed Arab population to make any concessions in this regard.

The Arab revolution also means the removal of the oil monarchies, Saudi Arabia, Kuwait, Qatar and the so-called United Arab Emirates, whose only real purpose is to steal the nonrenewable natural resources—oil and natural gas—of the region. The longer these oil monarchies remain, the more the natural wealth is squandered, reducing the possibilities for future accelerated capitalist development in the region. It also means the separation of religion from the state and the right of the people to support any religion or oppose all religions—which is the ultimate solution to the religious sectarian movements imperialism is using as part of its struggle to prevent the Arab nation from consolidating.

And last, but certainly not least, it means the full freedom of the workers to organize unions, political parties and a workers’ press.

If this were actually accomplished—and remember, I am speaking of a bourgeois-democratic revolution, not a socialist revolution—a tremendous impetus would be given to the development of capitalist production in the region. For example, a considerable portion of the revenues that are now being unproductively consumed by the incredible high living of Saudi and other oil princes of the oil-producing regions would be converted into productive capital. A common currency would encourage trade within the United Arab Republic—or whatever it would be called. Tariffs would be used to provide protection for developing Arab industries for a transitional period, much like the fast-developing young United States used tariffs to provide protection for emerging U.S. industries.

The growth of capitalist industry in the Arab world, supported by a pro-development capitalist government, would expand the home market and inevitably compete in the world market. Arab capitalism would then become an engine of crisis-breeding overproduction that would inevitably accelerate the revival of the revolutionary workers’ movement and socialist revolution on a global level.

Not surprisingly, the U.S. government and its NATO satellites are doing all they can to frustrate every move toward Arab unity. For example, in Libya they supported a “rebel” movement that has thrown that oil-rich, once developing country into chaos. In Syria, the capitalist media is openly discussing how the country is breaking up into different regions based on religious communities that have their roots in the pre-capitalist past. All this shows that the Arab world will not be able to realize its bourgeois-democratic revolution without a struggle to the death against the U.S. world empire and any other imperialism that might in the future attempt to step into its shoes, as the current events in Syria are illustrating. (9)

Though the crisis is most acute in the Arab world at the moment, the same analysis holds good for Latin America. The U.S., for exactly the same reasons, is opposed to what is called the Bolivarian revolution by progressive and revolutionary leaders in countries like Venezuela, Bolivia and Ecuador. Simon Bolivar (1783-1830), known as the “liberator” in Latin America, put forward the idea of a united Latin America, and this is what the Bolvarian leaders are putting forward today. Though the idea of a united Latin America in no way goes beyond capitalism, it is unacceptable to the Empire for the same reasons that a united Arab republic is unacceptable.

Ultimately, this applies to U.S. policy in Africa as well. Washington’s arch-reactionary foreign policy does not stem from the evil nature of Americans—or English, French, German, Australian or Israeli people—but ultimately from the fact that the leading barrier to capital is capital itself.

The breakdown theory

Heinrich quotes Marx in the manuscript he wrote during the crisis of 1857-58 that was later published under the title of “Grundrisse”—not the title Marx gave it: “As soon as labour in its immediate form has ceased to be the great source of wealth, labour time ceases and must cease to be its measure, and therefore exchange value [must cease to be the measure] of use value. The surplus labor of the masses has ceased to be the condition for the development of general wealth, just as the non-labour of the few has ceased to be the condition for the development of the general power of the human [brain]. As a result, production based on exchange value collapses.” (“Crisis Theory, the Law of the Tendency of the Profit Rate to Fall, and Marx’s Studies in the 1870s,” Monthly Review, April 2013)

Marx writing during the London winter of 1857-58 was well aware of capitalism’s tremendous and continuing development of the productivity of human labor. Marx was writing before the widespread application of electrical power to production, and when the computer revolution was still largely a theoretical idea of British inventor and mathematician Charles Babbage (1791-1871) (10) and his female mathematician co-worker Ada Lovelace (1815-1852), who is often considered the world’s first computer programmer. Together they are considered the world’s first computer scientists. The field of artificial intelligence and robotics, which is making so much progress in our own day, was a century into the future when Marx wrote his 1857-58 manuscript.

Marx foresaw a future productivity of labor so high due to the continued growth of science—today we would put special emphasis on computer science—that humans would be free of all mind-numbing routine work. In the past, class divisions could be justified because it freed up a small portion of society to develop philosophy, art, mathematics and science.

But Marx foresaw a future where labor productivity had developed far beyond the levels of 1857-58 and even today where all human beings will finally be able to develop to their full potential and not just a few lucky members of the ruling classes. Or as Marx in his “Critique of the Gotha Program”—his last major work—indicated, it will be possible in the “higher phase of communist society” to free human beings from the enslaving division of labor, and men and women will be able to realize their full potential while being “paid” according to their full material needs. Once the productive forces reach this stage of development, direct labor in any form ceases to be the measure of wealth, and classes cease to exist.

Once society has reached this stage of development—even sometime before it—no Gorbachev or Yeltsin will be able to return society back to capitalist relations of production; such a reversal will be no more possible than a return to medieval guilds and serfdom is possible today.

Capitalism, by developing the productive forces without apparent limit, is driving society in this direction foreseen by Marx. This is the historical justification for capitalism, and this why in the final analysis bourgeois-democratic revolutions are progressive. But like the Biblical Moses, capitalism will never be able to reach the “promised land.” Before we can reach the promised land where the productive forces are developed to the level that will make possible a society where all work according to their abilities and are “paid” according to their needs, capitalism as the final form of class society must be overthrown and buried.

Though capital, as Heinrich points out, has indeed developed the productive forces to levels unimaginable in any pre-capitalist era, it also has created at a high level of development barriers to production of its own. Exploring these barriers has indeed been the main subject of this blog. These barriers prevent capitalism from being the final form of human society. The task of freeing production from the specifically capitalist “barriers” to production falls to the working class.

Heinrich accepts all of Marxism–accept the revolutionary part

Heinrich specifically rejects the idea that capitalism cannot go on forever, which is so central to Marx’s entire theory of capitalist economy. He concedes that the “young” Marx held such ideas, even as recorded in the 1857-58 “Grundrisse” manuscript. But in “Capital,” Heinrich claims, written mostly during the 1860s, an older and wiser Marx abandoned such ideas. We saw this when we examined Heinrich’s critique of Marx’s famous “law of the tendency of the rate of profit to fall.” Heinrich has made a considerable effort to demolish what Marx considered to be the most important law of all political economy.

“Even disregarding all detailed objections,” Heinrich writes, “theories of collapse are confronted with the fundamental problem that they claim an inevitable developmental tendency that capitalism is so unable to deal with that its further existence become impossible—regardless of whatever happens in history.”

If these words have any meaning at all, they mean that Heinrich is claiming, in contrast to Marx, that capitalism can last forever. Heinrich believes that while a communist society without private property and commodity production—without market relations—is morally superior and preferable to present-day capitalist society, it is not an economic necessity.

Heinrich’s “new reading of Marx” is not, after all, new at all. On the contrary, it is old and moth-eaten. Bernstein, Tugan-Baranovsky and their ilk taught this exact doctrine—that socialism is above all a moral idea—more than a century ago. If this is true, according to the historical materialism of “world-view Marxism,” as Heinrich calls it, capitalism will indeed last forever, or at least, as Rosa Luxemburg liked to say, “until the sun burns out.”

In order to prove that capitalism can in principle last forever, Heinrich has had to put forward patent absurdities. For example, as we saw several months ago in his attempt to refute Marx’s law of the tendency of the rate of profit to fall, Heinrich ended up describing a capitalism with a negative rate of accumulation—in plain language a capitalism that runs at a loss. Now that is indeed a utopia, as any practical businessperson will tell you!

If capitalism is to last forever, the number of workers who produce surplus value must grow forever, without limit. In other words, the mass of the working class—in the sense defined by physics as the resistance of a body to acceleration in response to a given force, applied to the living human beings that make up the working class—must increase without limit.

In reality long before the “mass of the workers” reaches the limits of the quantity of mass-energy in the universe, the growing centralization of capital puts a definite limit—even if we can not in advance calculate it in years—on how long capitalist production can last.

Did Marx abandon his ‘breakdown theory’?

If Marx abandoned what Heinrich calls the “breakdown theory” by the beginning of the 1860s, what are we to make of this famous passage from Volume I of “Capital,” published in 1867, 10 years after the “Grundrisse” manuscript was written, and then republished several times during Marx’s lifetime.

“As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the labourers are turned into proletarians, their means of labour into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialization of labour and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist exploiting many labourers. This expropriation is accomplished by the action of the immanent laws of capitalistic production itself, by the centralization of capital. One capitalist always kills many. Hand in hand with this centralization, or this expropriation of many capitalists by few, develop, on an ever-extending scale, the cooperative form of the labour process, the conscious technical application of science, the methodical cultivation of the soil, the transformation of the instruments of labour into instruments of labour only usable in common, the economizing of all means of production by their use as means of production of combined, socialized labour, the entanglement of all peoples in the net of the world market, and with this, the international character of the capitalistic regime. Along with the constantly diminishing number of the magnates of capital, who usurp and monopolize all advantages of this process of transformation, grows the mass of misery, oppression, slavery, degradation, exploitation; but with this too grows the revolt of the working class, a class always increasing in numbers, and disciplined, united, organized by the very mechanism of the process of capitalist production itself. The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.” (Ch. 32: “Historical Tendency of Capitalist Accumulation”)

Now this is “world-view Marxism” with a vengeance!

Final thoughts on Heinrich

Heinrich, like many academic Marxists over the decades, seems to takes a dim view of dialectical materialism—often abbreviated as “Diamat”—and historical materialism. It is true that Marx didn’t specifically use these terms, though Engels did. It is also true as Heinrich points out that individual Marxists sometimes explain away complex phenomena that they don’t understand with sweeping expressions such as “you have got to look at things dialectically.” There is also the school boy and girl type of Marxism that believes that complex scientific questions like the nature of “quantum” reality can be explained by referring to dialectical materialism without a thoroughgoing study that takes many years of the physics and associated mathematics necessary to fully grasp our present-day understanding of these questions.

But none of these observations negates either dialectical materialism or historical materialism. Dialectics is a study of the contradictions that are found in both human society and nature—on this planet and throughout the universe. Such contradictions are the basis of all motion, change and evolution, both in nature and in human affairs.

Historical materialism is the application of dialectical materialism to human society. It explains that the forces of material production make certain classes necessarily come into existence in a particular epoch. Social classes arise not by accident, or the ill will or revelations of certain individuals, but because of the inner needs of production.

The productive forces of the classical world of ancient Greece and Rome gave rise to ancient slave society. The productive forces of medieval Europe necessarily gave rise to the relations of production that we call feudalism, while the productive forces of the civilizations of pre-Columbian America, Africa, India and China gave rise to the modes of production and class structures that characterized those civilizations in different phases of their development.

Similarly, the development of the modern productive forces has given rise to the very different relations of production and associated classes of capitalists and wage workers that dominate present-day society that we call capitalism. But Marx showed that the further development of today’s productive forces will of necessity bring about the downfall of capitalist rule and the end of class society, a negation of the negation.

Starting about 10,000 years ago, the development of the productive forces of at first a few human societies began to negate the traditional communistic clan-tribal relations of production. The negation of the negation means that a new society based on productive relations that are now coming into existence will resemble the human society of 10,000 years ago insomuch as all human societies before that date lacked classes and the state. But the classless society of the future will be on a vastly higher level than the ancient society of clans and tribes based on what are by today’s standards an extremely low level of labor productivity and its consequent universal poverty and ignorance.

In examining Heinrich’s work, we see a consistent pattern. Heinrich has a rare if not flawless grasp of Marx’s economic theory. And he also has a rare ability to explain ideas clearly—when he understands them. As long as Marx’s economic research doesn’t seem to point to any immediate or obvious revolutionary conclusion, Heinrich is willing to follow him. Therefore, even the well-educated Marxist can learn a lot from Heinrich’s writings. But once Marx’s scientific work begins to point to revolutionary conclusions, Heinrich takes flight. This is true on the question of the falling tendency of the rate of profit; the theory of value, price and money; and above all, the inevitable end of capitalist production.

There is an old expression for this kind of thing: “trimming Marx’s beard.” Heinrich gives Marx a close shave, making the 19th-century revolutionary with his unruly beard fit for the respectable bourgeois society of the early 21st century. Heinrich’s Marx is a worthy successor to Ricardo and certainly far superior to what passes as the “economic science” taught in university economics departments. In addition, Heinrich’s Marx offers a penetrating critique of present-day society, its injustices, false appearances and illusions. But the Marx who has been given a close shave by Heinrich is not a revolutionist. In his speech at Marx’s funeral in March 1883, his co-worker, Frederick Engels, explained that Marx was “above all, a revolutionist.” But that was, after all, the “world-view Marxism” of the workers’ movement.

_________

1 The inflation of the credit system can postpone the outbreak of a crisis but only at the cost of making the crisis worse when it does break out. While Heinrich sees the credit system as the cause of the long-term growth of the market, he cannot really explain why the market growth is necessarily less than the growth of production. This is because of the flaws in his theory of value and his consequent failure to understand Marx’s theory of money. Marx held that far from being a solution to the problem of overproduction, the expansion of credit exacerbates it.

2 Three-dimensional printers take digital computer files, perhaps downloaded from the Internet, made up of ones and zeros, on one side, and some raw material like powdered plastic, on the other, and produce three-dimensional objects like plastic cutlery. There is some speculation that the machines will be sold in large numbers to consumers, who will use them to produce plastic objects at home as a hobby. Such production is not capitalist production because it is not production for sale nor does it exploit wage labor.

But these printers also have the possibility to revolutionize the production of many commodities in capitalist industry and radically cheapen many commodities—eliminating many jobs in the process. If these possibilities pan out, the now very modest demand for three-dimensional printers would explode, possibly in the very near future.

3 Rudolf Hildferding’s (1877-1941) work “Finance Capital” was the first major work written from a Marxist standpoint to analyze the new phenomena of monopoly capitalism. Despite Hilferding’s mistake on the theory of money, the work exercised great influence on Lenin, and all later Marxist studies of monopoly capitalism, including those of Paul Sweezy and other members of the Monthly Review school.

Hilferding, after the split in the international workers’ movement growing out of World War I and the Russian Revolution, stuck with the Second International—the Social Democrats—and opposed the Communist International. Hilferding, who was of Jewish origin, died while he was in the custody of the Gestapo—the secret political police of Nazi Germany—in 1941.

4 Mandel, unlike Heinrich, never claimed that imperialism was a “policy.”

5 Whenever Heinrich is stuck in an absurdity, such as denying the centralization of capital or the increasingly parasitic nature of present-day monopoly capitalism, he throws in the term “problematic.” This, at least to me, is very annoying. But perhaps the text reads better in German than in English.

6 Apple Inc. uses its own proprietary version of Unix in its iThings—iMacs, iPhones, iPads, iPods—while most other smart phones and tablet computers use a variant of the Unix-like Android operating system. The only non-Unix-like operating system in contention is the Microsoft Windows operating system, which has long dominated the personal computer market but has so far been poorly received in the smart phone and tablet computer markets.

7 The term bourgeois-democratic revolution is often shortened to, simply, “democratic revolution.” This is well and good as long as we know what it means. But it can lead to confusion if “democratic revolution” is conflated with “socialist revolution.” As used by Marxists, the democratic revolution is aimed at establishing the best possible conditions for the development of capitalism, as well as the working class’s struggle against capitalism—culminating in the majority—the working class and its allies—taking power, finally achieving victory in “the battle for democracy” as Marx and Engels put it in the “Communist Manifesto.” Capitalism with all its “beauties” is the legitimate child of all bourgeois-democratic revolutions, while “winning the battle for democracy” by the working class opens the road to the construction of socialism.

The democratic revolution cannot overcome any of the basic evils inherent in capitalism such as class rule, unemployment, periodic economic crises, war, national oppression and racism. In order to achieve that, we need a socialist revolution led by the working class. Whether any section of the Arab bourgeoisie or petty bourgeoisie will be able to lead the democratic revolution, or whether the tasks of the democratic revolution will fall to the working class, as turned out to be the case in Russia, is a question that I will not examine here. I simply explored the consequences of a victorious Arab bourgeois-democratic revolution to explain why U.S. imperialism is such an enemy of the Arab revolution.

8 By white colony, I mean a population that comes from outside the country and attempts to drive out or kill off the native population rather than exploit them. An example of a “non-white” colony is India under British rule, where the colonizers viciously exploited the native population and indeed, while killing many of them, never attempted to replace the Indian population as a whole with British colonizers.

Saying Israel is a “white colony” does not mean that the Israeli rulers have no will of their own or simply passively reflect the interests of the “mother country”—in this case, currently, the United States. On the contrary, the history of Britain’s white colonies has shown that most of them have shown a tendency to develop their own interests that have often been in conflict with the mother country. In the late 18th century, 13 of these “white colonies” not only developed their own interests, they threw off the rule of the “mother country” altogether and established a rival capitalist country that eventually grew into the most powerful empire the world has ever seen, completely overshadowing the old “mother country.”

Could something similar happen in the case of Israel? This is the dream of the most fanatical Zionists, but it has no realistic chance of ever being realized. Why is this? In Israel, a few million Jews face hundreds of millions of hostile Arabs and perhaps a billion hostile Muslims. No wonder that Israel is obliged to look to the U.S. for protection, and indeed its dependence on the U.S. has tended to grow over time. Leaving morality aside, the only way the Israeli Jews can in the long run survive in the Middle East is to make their own peace with the Arabs by breaking with racist Zionism and welcoming the exiled Palestine Arabs back to their homeland. They must prove to the Arabs that their presence in the Middle East is a positive good from the Arab point of view and not an evil that the Arabs must reluctantly accept. If the Israeli Jews cannot rise to this level, they simply have no future in the Middle East.

9 I am no expert on Syria. I do know that many Western socialists—especially but not only those associated with what is known as the “international socialist” trend founded by the British Marxist Tony Cliff—are passionate about supporting the Syrian rebels and have expressed great hatred toward the Baath Party and its leader, the current Syrian president, Bashar Al-Assad.

As far I can tell from the Internet, there are roughly three major Syrian “parties” fighting for control. One is the current ruling Baath Party, which has existed since the 1930s and has a pan-Arab ideology. This party’s stated program is broadly progressive in the sense of the Arab bourgeois-democratic revolution.

The Syrian Communist Party, the only workers’ party with any significant support among Syrian workers, is allied with the Baath Party in the current armed struggle, though it is critical of many of President Assad’s policies. In addition, there are two small socialist Syrian groups that strongly support the “moderate rebels.” One is associated with the International Socialist Tendency and the other supports the Fourth International, headed for many years by the late Marxist economist Ernest Mandel (1923-1995). However, as far as I can tell from the Internet—and of course I am not on the scene and could be misinformed—these pro-rebel socialist groups have little support in the Syrian working class, among the rebels themselves, or in Syrian society generally.

The rebels are themselves sharply divided between what the U.S. media call the “moderate rebels” and the so-called jihadist rebels. The latter are themselves divided into two main groups: Al-Nusra and the Islamic Emirate of Iraq and the Levant. I admit I have no idea what the differences are between these two groups. The U.S. media often uses the term “moderate” as a code word for “pro-imperialist.” The “moderate” rebels organized around the Free Syrian Army, or FSA, seem to be based largely on the Muslim Brotherhood.

The leaders of the “moderate rebels” are so pro-imperialist that they have called for the bombing of their own country. They have demanded a “no-fly zone” on the Libyan model. As far as I can see, the “moderate rebels” have put forward no democratic program, while their supporters have shouted such slogans as “Death to the Alawites,” the religious sect that the Assad family belongs to.

This genocidal slogan is hardly democratic considering that about 10 percent of the Syrian population are from Alawite families. According to U.S. media reports, the leadership of the “moderate rebels” are extremely disappointed that President Obama did not go ahead with a threatened military strike against Syria. These “moderates” were apparently counting on U.S. and or NATO to turned the tide of battle in their favor through a massive military intervention. Instead of launching a massive military attack on Syria, President Obama agreed to a Russian proposal that involves Syria agreeing to being unilaterally stripped by the United Nations of all its chemical weapons while its neighbor Israel, not to speak of U.S. and NATO, remain armed to the teeth with chemical, biological and nuclear weapons as well as “conventional” weapons.

Reports in the U.S. media have indicated that some supporters of the rebels expressed opposition to Obama’s threatened military attack. It seems likely that if U.S. or NATO air strikes actually were to occur, a considerable portion of the rebel rank and file would break with their pro-imperialist misleaders and defend their country.

The Syrian Communist Party, assuming that they are following a Marxist policy—or any other group following a Marxist policy—should facilitate this process by putting forward a program that reflects the real interests of the rural poor and tribal people that make up the rebel rank and file—if necessary in opposition to the policies of President Assad and his bourgeois-nationalist Baath Party. In this way, the rural poor can be separated from the Muslim Brotherhood and the pro-imperialist “liberals” and united instead with the urban working class and its urban poor allies in the struggle to defend Syria’s independence from the imperialist efforts to eradicate it.

There are other rebels associated with various Islamic groups that want a state based on religious Sharia law—as many of the “moderate” rebels do as well. While Sharia law was a great step forward relative to the earlier rule of the Christian church in the Middle Ages, it represents a great step backward by the standards of present-day society and the gains that women have won under Baathist rule. For example, under Sharia law, my own atheistic views would be banned, and I would have to join some monotheistic religion, either Islamic, Christian or Jewish.

But the leadership of these “jihadist” rebels are reportedly less enthusiastic about the bombing of their own country than the “moderate rebels” around the FSA who are so strongly supported by the U.S. media, the International Socialist Tendency and the Fourth International. Perhaps the “jihadists” are well aware of the attacks against Muslims in the West and wonder what kind of “allies” the U.S. and NATO really are.

Oddly enough, the International Socialist Tendency, as well as the supporters of the Fourth International, have made clear that they do not support all the rebels but only the pro-imperialist rebels who want the U.S. and NATO to bomb their own country.

Unlike the FSA rebel leaders themselves, the International Socialist Tendency and Fourth International supporters are opposed to the imperialist bombing of Syria. That is all to the good, though it puts them at odds with the leadership “party” that they support in Syria.

But why should socialists support the most pro-imperialist party in Syria in the first place? If the analysis of this blog is correct—and this analysis is based on the examination of the laws that govern the capitalist economy and not on any special knowledge of Syrian or Arab politics and society—the pro-imperialist FSA—Muslim Brotherhood—rebels are actually the most reactionary of the contending parties in Syria, in the sense that their politics are most at odds with the objective needs of the bourgeois-democratic revolution of both Syria and the Arab world as a whole.

10 Babbage was a strong supporter of industrial capitalism. Though he supported capitalism against all forms of pre-capitalist reaction, this didn’t make him a friend of the working class.

He attempted to build what would be in effect a general-purpose digital computer using steam power. While this was possible in principle, such a computer would be about as big as a football field and would be unbelievably slow by the standards of any electronic computer that has ever been built. Before the general-purpose digital computer became possible, the use of electricity had to be developed far beyond the telegraphy it was used for when Marx was writing the “Grundrisse.” For example, vacuum tubes—or valves as the English call them—had to be invented. Today, all modern computers use transistors, and vacuum-tube computers have long been obsolete. None of this detracts from Babbage and Lovelace’s genius, quite the contrary.

21 Responses to “Michael Heinrich’s ‘New Reading’ of Marx—A Critique, Pt 4”

  1. Boffy Says:

    “The monopoly of capital becomes a fetter upon the mode of production, which has sprung up and flourished along with, and under it. Centralization of the means of production and socialization of labour at last reach a point where they become incompatible with their capitalist integument. This integument is burst asunder. The knell of capitalist private property sounds. The expropriators are expropriated.” (Ch. 32: “Historical Tendency of Capitalist Accumulation”)”

    What Marx is describing here is not the replacement of Capitalism with Socialism, but the replacement of the monopoly of “private” Capitalism, i.e. the capitalism of individual capitalist families, with socialised Capitalism, i.e. the Capitalism of the Joint Stock Company, in which everyone can, theoretically” be a shareholder.

    He expands on that description of the expropriation of the expropriators by this socialised Capital in Volume III, where he describes these Joint Stock Companies, as well as the Workers Co-operatives as the transitional form to the associated form of production, and the way credit could be used to extent both on a national scale.

    The meaning of “private” Capitalism used here by Marx is further emphasised in Engels “Critique of the Erfurt programme” where he makes this meaning clear. He says,

    “I am familiar with capitalist production as a social form, or an economic phase; capitalist private production being a phenomenon which in one form or another is encountered in that phase. What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”

    The misrepresentation of Marx’s comments about the expropriation of the expropriators is largely down to the statism of Stalinism.

  2. Davidj Says:

    The centralisation of capital is a tendency within stocks just as it is within industry and finance, being inseparable from monopoly finance.
    As an example mercury energy which when privatised was divided up amongst 100,000+ shareholders has in 10 years been consolidated between 50odd shareholders. The idea that shareholding or worker ownership under capitalist relations are socialist, was refuted as Bernstein distortion of Marx in Rosa Luxembourg’s ‘Reform or revolution.

    • Boffy Says:

      David,

      You are quite right that centralisation occurs within stocks, and Marx makes that point in Volume III, in exactly that section describing Joint Stock Companies and Co-operatives as the transitional forms to the associated mode of production, i.e. Socialism. That is why Marx says that the contradiction between Capital and Labour is resolved negatively in the one – Joint Stock Companies – and positively in the other – Co-operatives.

      I don’t think that either I or Marx have said that either of these forms are socialist. Quite the contrary, we both make the point that they are capitalist. But, Marx points out that as opposed to the monopoly of private capitalism, both these forms represent socialised capital. State Capitalism is also a form of socialised capital, but it is still capital, nothing socialist about it.

      And, yet, the very fact that these forms are transition, gives them a more progressive content than the old monopoly of private capitalist property, represented by the old style family or individually owned capitalist enterprise. That is why in talking about the expropriation of the expropriators, i.e. the expropriation of the old, individual capitalists by this socialised capital, Marx speaks of the conflict between the two.

      But, also I wouldn’t place too much faith in Luxembourg’s position either, because in the same piece that she was opposing the establishment of Co-ops, she was attacking in the same tone the Trades Unions. Luxembourg’s position has to be viewed precisely from the fact that she was polemicising against Bernstein, and that to use Lenin’s phrase, that led to her “bending the stick”.

      The fact, is that Marx, Engels, Lenin, Kautsky, Pannakoek, Gramsci etc. all argued for the development of Co-operatives as a means of building the power of the working-class within society, and providing a vision of how the future society would offer a better alternative than Capitalism.

    • Boffy Says:

      There is a further point. In the UK, workers pension funds amount to around £800 billion. That is enough capital to buy up 100%, the shares in around 75% of the FTSE 100 companies. In fact, this capital already is invested in many of these companies, via banks which thereby exercise considerable control.

      When looking at the concentration of share ownership, a lot of it will be seen to be in the hands of such institutional investors. If workers had democratic control over that £800 billion of their funds in their pensions they could exercise a great deal of control. In fact, if they had control over the nominal funds in the state controlled National Insurance Fund, that they pay into, and which is theoretically many times, the size of the money in these Pension Funds, they could buy up the share capital in most of British industry, certainly in its most important segments.

      One reason Capital established the National Insurance scheme, and welfare state, was to scoop up those funds for that reason, rather than workers having control of them in their Trades Unions and Friendly Societies. It is for the same reason that the state, via current law prevents workers from having democratic over those pension funds, and as Mike McNair has pointed out when I’ve discussed this with him in the past, it would require a Judicial Revolution, i.e. removing lots of judges etc. to change that, even if legislation were passed.

      It is on the same basis of such a political struggle, however, that Marx and Engels argued for workers to establish Co-ops and a Co-operative federation, and to defend it and extend it via political action through the Workers Party, and via their Trades Unions.

  3. Nikos Says:

    Greetings!
    I have a question, out of curiosity – this is not a criticism at all.
    I have noticed that very frequently you use examples from the computer, electronics and, in general, IT industries. Also, I know that you live close to the Silicon Valley, where many giant IT corporations are head-quartered.
    My question is this: How large is the global production of IT commodities compared to the global production of all commodities?
    Is your frequent use of IT examples “justified” by the size of the IT industry, or is it due to where you live?
    Again, I am not critical, I am just curious. In fact I really enjoy the use of these examples. Very often the unscientific theories about the so-called post-industrial era, post-capitalist knowledge-based society, etc., are based on the progress of the IT industry. I think it is very useful to show that the IT industry is 100% capitalist.

    • Boffy Says:

      Nicos,

      Why do you think the fact that the IT industry is 100% capitalist in any way changes the importance of its role within the modern economy? The importance of IT surely is the fact that, in large parts it contradicts some of the basic theories that Marx developed about early 19th Century Capitalism. For example, it is not at all necessarily the case in much of the technology industry that there is a rising organic composition of capital.

      In fact, it was a joke for a long time that this or that IT company had been so successful that they had moved to SMALLER premises. In other words, the central thesis of a rising organic composition of capital, that fewer more effective pieces of fixed capital, require fewer workers, but process larger and larger amounts of material, no longer necessarily holds for modern industry.

      In fact, modern industry tends to process less and less material, as well as the value of that material being slashed. Nobody buys CD’s let alone vinyl records anymore, for example, because they can download tens of thousands of tunes electronically, and store it on a tiny memory stick.

      That is one reason the Law of The Tendency for the Rate of Profit To Fall, does not hold today, if it ever did.

      • Nikos Says:

        Dear Boffy,

        Arguments like the ones you are making are exactly the reason why I want to know how large the IT sector is.

        Our computers, the servers on which the internet is based, the routers, the cables, the antennas, and all the relevant infrastructures and terminal devices, are all produced in gigantic factories, such as Foxconn’s notorious factories.

        Let’s assume that in these factories the rate of profit doesn’t tend to fall. Regardless of how we acquire our favourite music – by buying vinyls, CDs or by downloading it or what have you – we still need to eat food, dress in clothes, move around in vehicles, etc.

        So that’s why I am asking Sam, what’s the size of the It industry compared to the size of all other industries. In other words, if the IT industry deviated from what Marx wrote, what would be the impact of this deviation on how the global capitalist economy works?

        Cheers!

      • Boffy Says:

        Nicos,

        I don’t know about the IT sector, but in modern economies the majority of production is in services not manufacturing. In Britain, Services account for 78% of the economy.

        In fact, the amount spent on food, clothing etc. has been continually falling, whilst increasing amounts are spent on entertainment. These latter types of consumption are typified by a low organic composition of capital.

        In places like Foxconn there probably is a tendency for the rate of profit to fall, but the Apple products produced at Foxconn have 90% of their value accounted for, not by the manufacturing process, but by the nature of the complex labour, for design etc. that goes into the development of the product.

        A similar thing can be seen with even some of the things like food and clothing. A large amount of the value in various pieces of clothing comes not from the material used in the production, but from the complex labour of the designer, which stands behind the designer label.

      • Boffy Says:

        Nicos,

        The UK ONS data – http://www.ons.gov.uk/ons/rel/family-spending/family-spending/family-spending-2012-edition/art-chapter-1–overview.html#tab-Household-expenditure – shows that the largest household expenditure was on transport, followed by expenditure on leisure and culture.

        The amount spent on food was not that much greater than the amount spent on restaurants and hotels.

      • Victor Says:

        Boffy;
        My knowledge on the subject is very limited so this is not a criticism; it is rather an attempt to learn from people who know more. So it is more along the lines of asking questions and requests for further elaborations.
        To the best of my understanding, “trend of rising organic composition” is not about the “size” or even the mass (as in Kilogram) of “material”. It is precisely about the ratio of the amount the labour which was spent last year (in creating the constant capital) to the labour spent this year (in creating the freshly added value) in creating this years’ products. A piece of sophisticated software which is the product of highly sophisticated labour of the past years, and is used in creating today’s products is as “material” (despite that it maybe even downloadable and therefore not requiring even a plastic CD) as a gigantic piece of machinery made of metals which was being produced in the 19th century and was being used in those days factories.
        Also “engineering design” is often misunderstood as being R&D. The reality is that most of today’s engineering “designs” are actually commodities and are different from research which creates scientific papers to be published in scientific papers. The army of engineers who are employed in today’s electronic corporations such as IBM or AMD are not really “scientists” busy doing scientific research; majority of them do not even have MSc, and PhD would be considered as a waste of time for most engineering jobs in the industry. Engineers are educated labourers and their “designs” is nothing but the “commodities” that they have produced (even if it is just a software code).
        I really don’t have any data on which I can rely and that is why I would much appreciate if you could elaborate your point and share any data regarding the organic composition of capital in electronic industry. So for example take the following example:
        A CPU, in the 60’s would require many man-hours with NO SOFTWARE TOOLS, using ‘karnaugh maps’ to manually design digital circuits. They would have had to go over their design over and over again to make sure there are no mistakes in their calculations.
        Today with far less man-hours modern computers could be designed using computers made in the previous years (ie. constant capital) with extremely expensive pieces of software tool -all products of the previous years- running on them (again constant capital, and very expensive constant capital I might add!). In fact without those software tools and the already existing computers to design the future generation of the computers, the whole computer industry will come to a halt!
        Now compare this to the 60’s when the constant capital required by the engineers in designing the first digital circuits consisted of pencil, paper, eraser and ruler (and a slide-ruler at a pinch). Make a comparison between the value of the constant capital used in designing the computers in the 60’s and even I would say perhaps 70’s, as opposed to the value of the constant capital required to design a modern computer of 2013. Also compare the man-hour which used to be necessary to employ that constant capital in the 60’s to produce a computer and compare it to the man-hour necessary to employ today’s sophisticated constant capital (ie. soft ware tools and computers on which they run) to produce the computers of 2013.

      • Boffy Says:

        Victor,

        “To the best of my understanding, “trend of rising organic composition” is not about the “size” or even the mass (as in Kilogram) of “material”. It is precisely about the ratio of the amount the labour which was spent last year (in creating the constant capital) to the labour spent this year (in creating the freshly added value) in creating this years’ products.”

        In Volume I, Marx makes clear that the decisive element in the organic composition is the technical composition, not the value composition of capital. It is the physical amount of material to be processed not its value that is determinant given any technical state, for determining how much labour is required to process it. Moreover, it is changes in the technical composition that drive the organic composition Marx says. In other words, if the value of the material is constant, the organic composition will rise if the technical composition rises, and the technical composition rises, precisely because changes in technology, e.g. a new type of machine, leads to productivity rising, so that a given amount of labour processes an increased amount of material.

        Incidentally, many Marxists are confused in this regard too, seeing the basis of the rising organic composition lying in a growing amount of fixed capital. But, Marx says that fixed capital as well as labour-power falls relative to the material processed, because one better machine always replaces several older machines, and because rising productivity reduces the value of these machines, whilst the value of material does not fall so quickly.

        The point you make about software created by complex labour is interesting. Your point that the software then used by some firm to enable commodities to be downloaded etc, is constant capital is well taken. However, the fact is that if we take this production as occurring in Department I (Producer Goods), the fact remains that the capital used to produce it was more weighted to Variable Capital (the programmers) than to Constant Capital (the computers on which they worked).

        Moreover, when it comes to the value of say a mobile phone, it is the programmers labour that is immediately determinant in its value, as variable capital, and not some programme created by them to enable the phone to be produced. In other words, the programme enters the phone itself as a component part, as new value created by the programmers labour.

        In other words, the labour was not used to produce constant capital which then produced the phone, but is used itself to produce the phone.

        “Today with far less man-hours modern computers could be designed using computers made in the previous years (ie. constant capital) with extremely expensive pieces of software tool -all products of the previous years- running on them (again constant capital, and very expensive constant capital I might add!).”

        But, why is it very expensive constant capital? Not because it required considerable amounts of material for its production, but because its production required lots of complex labour to produce. When this constant capital is used for the production of other commodities, you are right that in calculating the rate of profit in the industries producing those commodities, that will affect the rate of profit. But, looking at the rate of profit as a whole that is no longer the case, because for the economy as a whole, the fact remains that a large part of the value created was a result of new value created by complex labour.

        I would also guess that even though the constant capital currently used to design computers will be far more expensive than that used in the 1960’s, in relative terms it will be less, because it will be far more productive than its predecessors.

  4. Boffy Says:

    “Tugan-Baranovsky held that capitalism would therefore never break down economically. Socialism, if it came at all, would have to come because it is a morally superior system, not because it is an economic necessity. This put Tugan-Baranovsky sharply at odds with the “world-view Marxists” of the time, who stressed that socialism would replace capitalism because socialism becomes an economic necessity once a certain level of economic development is reached.”

    And, of course, in that he was right! As Marx said, criticising the catastrophists of his day,

    ““A distinction must he made here. When Adam Smith explains the fall in the rate of profit from an over-abundance of capital, an accumulation of capital, he is speaking of a permanent effect and this is wrong. As against this, the transitory over-abundance of capital, over-production and crises are something different. Permanent crises do not exist.”

    Theories of Surplus Value

    That is one reason Marx argued that the most important development was the workers creating Co-operatives.

    “The value of these great social experiments cannot be overrated. By deed instead of by argument, they have shown that production on a large scale, and in accord with the behests of modern science, may be carried on without the existence of a class of masters employing a class of hands; that to bear fruit, the means of labor need not be monopolized as a means of dominion over, and of extortion against, the laboring man himself; and that, like slave labor, like serf labor, hired labor is but a transitory and inferior form, destined to disappear before associated labor plying its toil with a willing hand, a ready mind, and a joyous heart. In England, the seeds of the co-operative system were sown by Robert Owen; the workingmen’s experiments tried on the Continent were, in fact, the practical upshot of the theories, not invented, but loudly proclaimed, in 1848.”

    Inaugural Address To The First International.

    The Co-operatives as well as the other form of socialised capital, the Joint Stock Companies were he argued the transitional form to Socialism.

    “The co-operative factories of the labourers themselves represent within the old form the first sprouts of the new, although they naturally reproduce, and must reproduce, everywhere in their actual organisation all the shortcomings of the prevailing system. But the antithesis between capital and labour is overcome within them, if at first only by way of making the associated labourers into their own capitalist, i.e., by enabling them to use the means of production for the employment of their own labour. They show how a new mode of production naturally grows out of an old one, when the development of the material forces of production and of the corresponding forms of social production have reached a particular stage. Without the factory system arising out of the capitalist mode of production there could have been no co-operative factories. Nor could these have developed without the credit system arising out of the same mode of production. The credit system is not only the principal basis for the gradual transformation of capitalist private enterprises into capitalist stock companies, but equally offers the means for the gradual extension of co-operative enterprises on a more or less national scale. The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”

    Capital III, Chapter 27.

    The fact that Marx talks here about credit being “the means for the gradual extension of co-operative enterprises on a more or less national scale” shows just how much the statists have distorted Marx and Engels views about the transition to Socialism, as being a bottom up gradual process. In fact, Engels elsewhere also describes how he and Marx saw Co-operatives playing a central role for a prolonged period in that transition.

  5. Boffy Says:

    “If the tendency of the rate of profit is downward, this implies a limit of capitalist accumulation in terms of value, since new capital is overwhelmingly formed out of accumulated profits.”

    But, for the reasons Marx sets out it does NOT imply a limit in terms of value. At most it implies a relative limit, i.e. it implies the rate of growth might fall. But, as Marx points out, the rate of profit is only determinant for the smaller capitals. For big capitals, the fall in the rate of profit is compensated by the increase in the volume of profit.

    Provided the volume of profit continues to rise, then the absolute amount of accumulation can continue to rise also. For example, China is growing at around 7.5% p.a. today as opposed to between 10-12% in previous years. However, the Chinese economy today is twice as big as it was 10 years ago. In other words, in absolute terms, China’s 7.5% growth rate today is the equivalent in absolute terms to a 15% rate of growth 10 years ago! In absolute terms China is growing more today than it was 10 years ago!

    Similarly, as Marx points out, this growth in value terms hides an even bigger growth in terms of use values. That is important for all the reasons Marx sets out. For Capitalist expansion it is the growth of physical capital not capital value that is decisive. It is the physical quantity of capital, given any technical composition of capital, that determines how much labour-power is employed, and it is the amount of labour-power employed that determines how much surplus value is produced.

    That is true also for say the IT industry. Even though it might employ fewer actual workers than old industries employed, this labour is highly complex, i.e. the value of its product is many times that of simply labour. The surplus value it produces is therefore also that much greater.

    But, as Marx also points out, if the value of use values falls, not only are capitalists able to buy more use values for productive consumption, but they are able to buy more use values for individual consumption, or alternatively can buy the same quantity for less money. That means that those capitalists have to spend less satisfying their individual consumption needs, and have correspondingly more money-capital to use for accumulation.

  6. Boffy Says:

    “First, Lenin stressed that imperialism is not a policy at all but monopoly capitalism itself. Leaving that not unimportant point aside, no matter how much of the total capital exported goes to other imperialist countries, the capital that is exported to oppressed countries—colonies, semi-colonies and neo-colonies, where the value of labor power is far lower and the rate of surplus value consequently far higher—extracts super-profits that can be shared through various mechanisms with the upper layers of the working class. Therefore, the export of capital to oppressed countries has an economic, social and political significance that the export of capital among the imperialist countries does not have.”

    Lenin’s “Imperialism” was written as a piece of propaganda not deeply thought out economic analysis, which shows in the sloppiness of the argument. However, there is nothing in Lenin that indicates he was opposed to “Imperialist” investment in less developed economies. Quite the contrary. He opposed the Narodniks, who had seen foreign investment in Russia as somehow unnatural. He attempted to get foreign capital to invest in Russia after the revolution. Trotsky certainly did not see any reason for “imperialist” investment in less developed economies to be opposed, or to be seen as in some way less desirable than domestic capitalism.

    For example, Trotsky wrote in relation to the Balkans, whilst opposing military intervention:

    “The Great Powers should be allowed to seek places for themselves in the Balkan Peninsula in one way only, that of free commercial rivalry and cultural influence.”

    And, in relation to Mexico, as with lenin’s attempt to get imperialist investment in Russia, Trotsky advised Cardenas to try to obtain similar investment in Mexico. Trotsky wrote,

    “Considerable international capital is seeking areas of investment at the present time, even where only a modest (but sure) return is possible. Turning one’s back on foreign capital and speaking of collectivisation and industrialisation is mere intoxication with words.

    The reactionaries are wrong when they say that the expropriation of the oil companies has made the influx of new capital impossible. The government defends the vital resources of the country, but at the same time it can grant industrial concessions, above all in the form of mixed corporations, i.e. enterprises in which the government participates (holding 10 percent, 25 percent, 51 percent of the stock, according to the circumstances) and writes into the contracts the option of buying out the rest of the stock after a certain period of time. This government participation would have the advantage of educating native technical and administrative personnel in collaboration with the best engineers and organisers of other countries. The period fixed in the contract before the optional buying out of the enterprise would create the necessary confidence among capital investors. The rate of industrialisation would be accelerated.”

    To present foreign capital as somehow worse for workers than their own domestic capital is to adopt the same kind of nationalistic stance of the Stalinists, which leads to the Popular Front, of workers making an alliance with their own domestic bourgeoisie as though it were some form of lesser evil. It is what leads to the kind of national-socialist politics of the various Stalinist “national roads” to Socialism that put forward policies such as Import Controls or Immigration controls to protect the domestic national capital against foreign capital. It is a fundamental rejection of the Marxist notion that the main enemy is at home.

    The idea that this capital in any case extracts more surplus value from workers in less developed economies, simply because their wages are low, is fundamentally wrong. Marx showed why that is the case in Capital I, Chapter 22, where he shows that British Capital was able to extract more surplus value from its workers, and be more competitive than its European competitors, despite the fact that European wages were 50% lower. They did so, because British workers were far more productive due to being backed by much better, and more machinery.

    That is why Capital from developed capitalist economies has tended to invest in other developed economies rather than in less developed economies in the past, because it was able to make higher profits by doing so. It is only when the less developed economies rise above a certain stage, and when workers in those countries can likewise be backed by adequate levels of machinery, that it becomes worthwhile for capital to invest there on a large scale.

    Marx, did make a mistake in that regard in Volume III, as I’ve set out Here, however.

  7. The man with no name Says:

    Boffy said,

    “What Marx is describing here is not the replacement of Capitalism with Socialism, but the replacement of the monopoly of “private” Capitalism, i.e. the capitalism of individual capitalist families, with socialised Capitalism, i.e. the Capitalism of the Joint Stock Company, in which everyone can, theoretically” be a shareholder.”

    This is just nonsense. Marx never held a theory that everyone could be a shareholder. Marx begins by saying that monopoly capital becomes a fetter and he moves from this to the overthrow of capitalism, as he precedes the talk of expropriating the expropriators with an image of a revolting proletariat. To twist this passage as you do is puzzling. I guess it doesn’t fit into your image of how capitalism will meet it’s demise, so you make the facts fit the image.

    Marx makes clear in this passage that capitalism could go on until the sun burns out, if the wage slaves allow that to happen. So far there is little indication that they are about to become active participants in history. You have to conclude that Fukuyama was wrong, he was too quick to repudiate his own his end of history theory!

    Boffy said,

    “The idea that this capital in any case extracts more surplus value from workers in less developed economies, simply because their wages are low, is fundamentally wrong. Marx showed why that is the case in Capital I, Chapter 22, where he shows that British Capital was able to extract more surplus value from its workers, and be more competitive than its European competitors, despite the fact that European wages were 50% lower. They did so, because British workers were far more productive due to being backed by much better, and more machinery.
    That is why Capital from developed capitalist economies has tended to invest in other developed economies rather than in less developed economies in the past, because it was able to make higher profits by doing so.”

    Here you casually mix up surplus value with profit rate. Marx recognized that higher profit rates were realized in colonial trade, due to increased exploitation, selling above the value due to competitive advantage etc.

  8. Boffy Says:

    “This is just nonsense. Marx never held a theory that everyone could be a shareholder.”

    And it doesn’t say that Marx did propose such a view. It says,

    “in which everyone can, theoretically” be a shareholder.”

    In Capital III, Marx qualifies that analysis of the change to this kind of “socialised” capital, by pointing out that shareholdings themselves become concentrate in the hands of a few. But, that does not change the fact that Marx says, of the establishment of Joint Stock Companies as the expropriation of the expropriators

    “This is the abolition of the capitalist mode of production within the capitalist mode of production itself, and hence a self-dissolving contradiction, which prima facie represents a mere phase of transition to a new form of production. It manifests itself as such a contradiction in its effects. It establishes a monopoly in certain spheres and thereby requires state interference. It reproduces a new financial aristocracy, a new variety of parasites in the shape of promoters, speculators and simply nominal directors; a whole system of swindling and cheating by means of corporation promotion, stock issuance, and stock speculation. It is private production without the control of private property.”

    He goes on,

    “Aside from the stock-company business, which represents the abolition of capitalist private industry on the basis of the capitalist system itself and destroys private industry as it expands and invades new spheres of production, credit offers to the individual capitalist; or to one who is regarded a capitalist, absolute control within certain limits over the capital and property of others, and thereby over the labour of others.”

    And,

    “The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”

    It is what Engels means when he said,

    “I am familiar with capitalist production as a social form, or an economic phase; capitalist private production being a phenomenon which in one form or another is encountered in that phase. What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”

    Marx does not begin in that Chapter in Volume with the idea that monopoly capitalism becomes a fetter, and could not possibly have done so, because at the time he was writing monopoly capitalism did not exist!!!! Monopoly Capitalism did not arise until 50 years after the period he was writing! The monopoly he is describing is the monopoly of ownership by private, i.e. individual owners as opposed to collective owners of capital, i.e. Joint Stock companies.

    Nor does he start that Chapter with an analysis with an image of a revolting proletariat, the Chapter is all about the concentration and centralisation of capital, which reaches its limit and becomes a fetter so long as ownership is in the hands only of individual owners, which is precisely why Joint Stock Companies have to replace them!

    “Here you casually mix up surplus value with profit rate. Marx recognized that higher profit rates were realized in colonial trade, due to increased exploitation, selling above the value due to competitive advantage etc.”

    No, I do not, Marx makes clear that because British workers were more productive due to having large amounts of machinery backing them up, their labour becomes like complex labour compared to workers that do not. It causes he says a modification of the Law of Value at an international level. The consequence is that an hour of labour by a British worker is worth many hours of labour by a worker in a country where the level of productivity is much lower. The consequence is that not only does an hour of British worker’s labour create more value, but it consequently also produces more surplus value. As a result, the rate of profit in Britain is also therefore, much higher than that in the less developed economy.

    That is why capital has generally tended to invest in developed economies where the level of productivity and rate of profit is higher, rather than in less developed economies where the level of productivity is generally lower, and along with it the rate of profit. Its only when the latter can produce with the same kind of level of productivity that they provide higher rates of profit.

  9. Boffy Says:

    “Marx recognized that higher profit rates were realized in colonial trade, due to increased exploitation, selling above the value due to competitive advantage etc.”

    But, Marx also says that the rate of exploitation itself would normally be lower in a less developed economy, precisely because of the lower level of productivity! He says,

    “The labourer would then spend more of his time in reproducing his own means of subsistence, or their value, and less time in producing surplus-value; consequently, he would perform less surplus-labour, with the result that the rate of surplus-value would be lower. Suppose, the labourer of the less developed country were to work ⅔ of the working-day for himself and ⅓ for the capitalist; in accordance with the above illustration, the same labour-power would then be paid with 133⅓ and would furnish a surplus of only 60⅔.”

  10. Victor Says:

    Boffy (in reply to your message on October 18, 2013 at 5:02 pm);

    First let’s quote Marx himself directly in his definition of the organic composition.
    Capital volume I, chapter 25:
    “The composition of capital is to be understood in a two-fold sense. On the side of value, it is determined by the proportion in which it is divided into constant capital or value of the means of production, and variable capital or value of labour power, the sum total of wages. On the side of material, as it functions in the process of production, all capital is divided into means of production and living labour power. This latter composition is determined by the relation between the mass of the means of production employed, on the one hand, and the mass of labour necessary for their employment on the other. I call the former the value-composition, the latter the technical composition of capital.

    Between the two there is a strict correlation. To express this, I call the value composition of capital, in so far as it is determined by its technical composition and mirrors the changes of the latter, the organic composition of capital. Wherever I refer to the composition of capital, without further qualification, its organic composition is always understood.”

    As it could be seen “Organic composition” is the “value composition” but only provided that it mirrors a change in the technical composition. Meaning that in order to be able to talk about “organic composition” the *value relationship* between then constant capital and the variable capital MUST change, but this change (in the value composition) MUST be a result of a change in the technical composition and not for some reason unrelated to the technical composition.
    And as we know value is the socially necessary labour, and not some mass measured in Kilograms. Gold is far more valuable than iron, meaning that a few grams of gold is equal in value to a few hundred kilograms of iron. It is therefore not a relationship between the masses of physical material, but rather a relationship between how much labour was socially necessary to produce a few grams of gold as opposed the socially necessary labour required to produce a few hundreds of kilogram of iron.
    A product may have a zero net weight (as in the case of a software program) and never the less may contain considerable amount of value (because of the socially necessary labour congealed in it).
    Marx further clarifies his point about the organic composition in the 3rd volume of capital.
    Capital volume III, chapter 13:

    Since the mass of the employed living labour is continually on the decline as compared to the mass of materialised labour set in motion by it, i.e., to the productively consumed means of production,[Victor: in this sentence, Marx just defined very clearly the rise in the organic composition of capital. Note the he is talking about the “mass of labour”, not the mass of commodities or products] it follows that the portion of living labour, unpaid and congealed in surplus-value, must also be continually on the decrease compared to the amount of value represented by the invested total capital. Since the ratio of the mass of surplus-value to the value of the invested total capital forms the rate of profit, this rate must constantly fall.”

    So the organic composition of capital should be seen as the ratio between the portion of the value of a commodity (be it a machine, a loaf of bread, or some software program) which has been transfered to it, from the constant capital (ie. the ‘dead’ labour of the past, as the sum of the depreciation of the fixed capital and the value of the raw and auxiliary material consumed in the product) to the freshly added labour of this year (by the variable capital).
    So as in the example of a software product, one has to compare ON ONE HAND the sum of: the depreciation in the value of software tools used by the engineer as he was developing his program, the depreciation of the computers he was working on (as he developed his program) as well as any other software tools he may have used in testing his product, ON THE OTHER HAND to the amount of labour spent while he created his program.
    Each one of those software tools are the dead labour of the past. They are ‘means of production’ provided to him by his employer. The engineer did not create them; it was his employer bought those software tools from some other software company. And the engineer does not own them (he cannot even dream of owning them they are extremely expensive tools). And this is what Marx means by the disscoiation of the workers from the means of production. Means of production (eg. the expensive software tools and the mainframe computers) are the product of the past labour and BELONG to the capitalist (NOT to the employed engineer). It is precisely the proportion of the depreciation of these software tools to the labour spent by the “socially average” engineer in using those software tools to create his product (ie. his program) which would determine the organic composition of the capital.

    Now I will refer to some parts of your message and briefly make a comment on them.
    You say:
    “The point you make about software created by complex labour is interesting. Your point that the software then used by some firm to enable commodities to be downloaded etc, is constant capital is well taken. However, the fact is that if we take this production as occurring in Department I (Producer Goods), the fact remains that the capital used to produce it was more weighted to Variable Capital (the programmers) than to Constant Capital (the computers on which they worked).”
    I don’t see how the capital used to produce a software product is more weighted towards the programmers than towards the constant capital.
    First as I mentioned before the constant capital is not just the “computer”, there are a lot of software tools used for both development and testing, and sometimes these software tools (without which the programmer CANNOT create his program) are more expensive than the computers they run on. And these software tools -as I mentioned before- have not been made by our engineer who uses them to develop his own program. These software tools are the products of other corporations which have been bought by our engineer’s employer who then provided them to our engineer so that he can use them as the means of production in developing his own program.
    Secondly, the “computer” itself can be a really sophisticated and expensive machinery, not your average “PC”.
    Now I don’t have any numbers, if you do I would appreciate it greatly if you would share them with me to demonstrate that the capital is more weighted towards the programmers than it is towards the constant capital.

    You also say:
    “In other words, the labour was not used to produce constant capital which then produced the phone, but is used itself to produce the phone.”
    With this part I will have to completely disagree. There is a huge amount of constant capital (from the electronic machinery and lab instruments to various software tools) in all giant electronic corporations (eg. Motorola, AMD, Intel, etc etc). The reason that workers (in this case the engineers and technicians) cannot work on their own is that they don’t have the wherewithal to get their own means of production. Had all the capital been to be spent on the workers and very little on the constant capital, they would not need to work for somebody else, they would work for their own.

  11. Boffy Says:

    Viktor,

    Sorry, I’m only just replying to this, as I had other pressing things to write, and stopped looking at comments here, so I’ve only just seen your comment. Unfortunately, I think you misunderstand some basic concepts. You say, in relation to the OCC,

    “And as we know value is the socially necessary labour, and not some mass measured in Kilograms. Gold is far more valuable than iron, meaning that a few grams of gold is equal in value to a few hundred kilograms of iron. It is therefore not a relationship between the masses of physical material, but rather a relationship between how much labour was socially necessary to produce a few grams of gold as opposed the socially necessary labour required to produce a few hundreds of kilogram of iron.”

    This seems to confuse what Marx is saying about the OCC, and what he says about Value, and here the Value of Constant Capital.

    The whole point about the OCC and in particular the Technical Composition is that it is the physical relation that is decisive. Gold does require a lot of labour-time for its production compared to iron, which is why Gold has a higher value than iron. But, it is the fact that large quantities of iron require large amounts of labour-power to process them, whereas small quantities of of gold require small quantities of labour-power to process them, which determines the technical composition of capital.

    Of course, given technical change, a large quantity of iron might also be processed by a small quantity of labour-power – if new machines are introduced, for example. But, for any given level of technology, it is the relation between the physical amount of material processed and the physical amount of labour-power used to process it which determines the technical composition, and if the value of the materials and labour-power remain constant, this is then, as Marx says, determinant of the organic composition.

    On the issue of phones and other high tech products, the fact remains that taking Capital as a whole, some high value labour must have produced even the high tech means of production. So, for example, I agree that some very clever programmers produced the software tools, which when used to produce other software constitutes constant capital. But, the labour that produced the software tools is itself very high value.

    Moreover, just because the software tools are high value, does not change the fact that the labour that uses them to produce other software is also high value. Moreover, as Marx sets out the value of fixed capital tends to fall, and the software tools here would be fixed capital. What determines this in this case is this. The software tools, unlike a machine that wears out in production, depreciates due to time etc. once acquired does not physically deteriorate.

    Its duration is very long, so the use value it gives up is near zero, and the value it gives up to the end product is also thereby low. Its only real deterioration is a form of moral depreciation, because new better software tools come out, which require companies to upgrade.

    Companies like Intel etc. may have large amounts of equipment, some of it high value, but as Marx sets out, the real basis of the organic composition is not the fixed capital employed, but the constant capital processed, i.e. material. The more a textile company raises its productivity by the introduction of better spinning and weaving machines, the the more cotton it processes, and so the technical composition of capital rises, and along with it the organic composition. In fact, as Marx sets out, in this process the quantity and value of fixed capital declines relative to the quantity of material processed, because technological improvements mean each machine does the job of several older machines, and at the same time the cost of these machines declines.

    But, these companies like Intel process only small amounts of material by contrast. As I’ve said in the past take something like music. Fifty years ago, a band would produce a song in a studio, the equipment used to do that might have been basic compared to that of today. The record would then be pressed on to millions of copies of vinyl. In other words, the material (vinyl) processed would be considerable and costly.

    Today, the fixed capital might be more sophisticated, but probably in real terms no more value than the fixed capital used 50 years ago, but no equipment is required to press vinyl, and no vinyl is pressed, yet the number of copies of the song issued will be many times what it was 50 years ago. The circulating constant capital has been reduced massively, thereby reducing the technical composition of capital and with it the organic composition.

  12. Boffy Says:

    I should just clarify the term “process” which is what I think is causing you a problem. The term “process” here does not mean the labour required to produce iron or gold, but the labour required to process it as a raw material in the production of some other commodity, in the same way that cotton is processed as raw material in the production of linen.

    £1,000 of Gold requires the same labour time to produce, as £1,000 of iron, but relatively little to process it into jewellery, whereas £1,000 of iron may require much more labour to process it into body panels for a car. This may be a bad example, because the labour of the jeweller would be complex, but the point is that a large physical quantity of some use value will usually require more labour to process than a small physical quantity.

    I should point out again that I only came across this comment by accident, and so as I’m very busy at the moment, I can’t guarantee to reply again or at least not in the near future.

  13. Satan Says:

    Dear Boffy,

    Satan is just a simple demon. You seem to love to go into a lot of detail. Maybe that is a good thing. But it is too much of a good thing for this question.

    I mean for this question of what does Marx mean here by: “…The expropriators are expropriated…”
    Chapter 32.

    Mr. Mark Twain reasoned that the announcement of his funeral was an exaggeration. It would be just the same here.

    The exaggeration here would be to announce that The Joint Stock Company has expropriated all private expropriators. It remains the expropriation of the expropriator by other expropriators.

    In his Chapter 32., Marx speaks in very general terms and so does not bother to mention the words: Joint Stock Company. But he rather explains the outcome of “the revolt of the working class” in these words:

    “… the possession in common of the land and of the means of production…”
    Chapter 32

    What he means by: “…the possession in common of the land and of the means of production…”, Marx explains in his first Chapter:

    “Let us now picture to ourselves, by way of change, a community of free individuals, carrying on their work with the means of production in common, in which the labour power of all the different individuals is consciously applied as the combined labour power of the community. All the characteristics of Robinson’s labour are here repeated, but with this difference, that they are social, instead of individual. Everything produced by him was exclusively the result of his own personal labour, and therefore simply an object of use for himself. The total product of our community is a social product. One portion serves as fresh means of production and remains social. But another portion is consumed by the members as means of subsistence. A distribution of this portion amongst them is consequently necessary. The mode of this distribution will vary with the productive organisation of the community, and the degree of historical development attained by the producers. We will assume, but merely for the sake of a parallel with the production of commodities, that the share of each individual producer in the means of subsistence is determined by his labour time. Labour time would, in that case, play a double part. Its apportionment in accordance with a definite social plan maintains the proper proportion between the different kinds of work to be done and the various wants of the community. On the other hand, it also serves as a measure of the portion of the common labour borne by each individual, and of his share in the part of the total product destined for individual consumption. The social relations of the individual producers, with regard both to their labour and to its products, are in this case perfectly simple and intelligible, and that with regard not only to production but also to distribution… …The life-process of society, which is based on the process of material production, does not strip off its mystical veil until it is treated as production by freely associated men, and is consciously regulated by them in accordance with a settled plan. This, however, demands for society a certain material ground-work or set of conditions of existence which in their turn are the spontaneous product of a long and painful process of development…”
    Chapter One. Section 4.

    That is what Marx means by:

    “The expropriators are expropriated.”

    Yours sincerely,

    Satan

    thedevilsatan1@gmail.com

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